Stop loss and take profit
What you learn in 3 minutesThis lesson shows how two orders attached to a position — a stop loss and a take profit — decide the money you lose or gain before the trade even opens. On EUR/USD at about 1.0850, one pip on a 0.10 lot is worth roughly ₦1,085, so a 20-pip stop is about ₦21,700 and a 40-pip take profit about ₦43,400. You will see where those naira figures come from and what your broker may add on top.
One 0.10 lot trade with a 20-pip stop and a 40-pip take profit
| Step | Amount | Note |
|---|---|---|
| Instrument and entry price | EUR/USD at 1.0850 | the price used for the whole example |
| Position size | 0.10 lot | one tenth of a standard lot of 100,000 units |
| Value of one pip | about ₦1,085 | one pip on one standard lot is 10 units of the quote currency, converted at the current rate; one tenth of that is 1 unit, and 1 unit is about ₦1,085 at the rate used here |
| Stop loss distance | 20 pips | chosen before the trade opens |
| Loss if the stop is hit | about ₦21,700 | 20 pips x ₦1,085 per pip |
| Take profit distance | 40 pips | chosen before the trade opens |
| Gain if the take profit is hit | about ₦43,400 | 40 pips x ₦1,085 per pip |
The broker may round the pip value, quote a slightly different exchange rate, and charge a spread or commission on top. Those charges vary between brokers, so the final naira amount can differ from the figures above.
The mistake people make here
The common mistake is to open the trade first and think about the stop later, or to move the stop further away when price comes close to it. That turns a planned loss of about ₦21,700 into a much larger one, because the position stays open while the market keeps moving. Decide both the stop and the take profit before you click buy or sell, and write down the naira amount you are risking. If that amount is more than you are willing to lose on one trade, reduce the position size instead of widening the stop.Check yourself
On EUR/USD, one pip on a 0.10 lot is about ₦1,085. What is the loss in naira if a 25-pip stop loss is hit?
25 pips x ₦1,085 per pip = about ₦27,125.
With the same pip value, what is the gain in naira if a 60-pip take profit is hit?
60 pips x ₦1,085 per pip = about ₦65,100.
A reader risks ₦21,700 on a 20-pip stop. If they move the stop to 50 pips without changing the lot size, what is the new loss?
50 pips x ₦1,085 per pip = about ₦54,250, which is ₦32,550 more than the original plan.